Eaton v. Fed. Nat'l Mortg. Ass'n, SJC–11041.

CourtUnited States State Supreme Judicial Court of Massachusetts
Writing for the CourtBOTSFORD
Citation969 N.E.2d 1118,462 Mass. 569
Docket NumberSJC–11041.
Decision Date22 June 2012

462 Mass. 569
969 N.E.2d 1118

Henrietta EATON


Supreme Judicial Court of Massachusetts,

Argued Oct. 3, 2011.
Decided June 22, 2012.

[969 N.E.2d 1120]

Richard E. Briansky (Joseph P. Calandrelli with him), Boston, for the defendants.

Samuel Levine (David A. Grossman & H. Esme Caramello with him) for the plaintiff.

The following submitted briefs for amici curiae:

Adam J. Levitin, pro se.

Max Weinstein, Stuart Rossman, Boston, & Paul Collier for WilmerHale Legal Services Center & others.

Marie McDonnell, Boston, pro se.

Diane C. Tillotson, Robert J. Moriarty, Jr., Boston, & Thomas O. Moriarty, Braintree, for Real Estate Bar Association & another.

John L. O'Brien, Jr., pro se.

Steven A. Ablitt & James L. Rogal, Woburn, for Ablitt Scofield, P.C.

Mark B. Johnson, Andover, & Michael A. Klass for American Land Title Association.

Richard A. Oetheimer, Boston, for Mortgage Bankers Association.

Suchand Reddy Pingli, pro se.

Katherine McDonough, pro se.

Robert P. Marley, pro se.

Howard N. Cayne & David D. Fauvre, of the District of Columbia, & Asim Varma & Douglas M. Humphrey for Federal Housing Finance Agency.

Robert Napolitano, North Andover, pro se.



[462 Mass. 570]In this case, we address the propriety of a foreclosure by power of sale undertaken by a mortgage holder that did not hold the underlying mortgage note. A judge in the Superior Court preliminarily enjoined the defendant Federal National Mortgage Association (Fannie Mae) from proceeding with a summary process action to evict the plaintiff, Henrietta Eaton, from her home,

[969 N.E.2d 1121]

following a foreclosure sale of the property [462 Mass. 571]by the defendant Green Tree Servicing, LLC (Green Tree), as mortgagee. The judge ruled that Eaton likely would succeed on the merits of her claim that for a valid foreclosure sale to occur, both the mortgage and the underlying note must be held by the foreclosing party; and that because Green Tree stipulated that it held only Eaton's mortgage, the foreclosure sale was void, and the defendants therefore were not entitled to evict Eaton. Pursuant to G.L. c. 231, § 118, first par., the defendants petitioned a single justice of the Appeals Court for relief from the preliminary injunction. The single justice denied the petition and reported his decision to a panel of that court. We transferred the case to this court on our own motion.

For the reasons we discuss herein, we conclude as follows. A foreclosure sale conducted pursuant to a power of sale in a mortgage must comply with all applicable statutory provisions, including in particular G.L. c. 183, § 21, and G.L. c. 244, § 14. These statutes authorize a “mortgagee” to foreclose by sale pursuant to a power of sale in the mortgage, and require the “mortgagee” to provide notice and take other steps in connection with the sale. The meaning of the term “mortgagee” as used in the statutes is not free from ambiguity, but we now construe the term to refer to the person or entity then holding the mortgage and also either holding the mortgage note or acting on behalf of the note holder.2 Further, we exercise our discretion to treat the construction announced in this decision as a new interpretation of the relevant statute, only to apply to foreclosures under the power of sale where statutory notice is provided after the date of this decision. We vacate the preliminary injunction and remand the case to the Superior Court for further proceedings consistent with this opinion.3

[462 Mass. 572]1. Background.4 On September 12, 2007, Eaton refinanced the mortgage on her home in the Roslindale section of Boston (Roslindale property) by executing a promissory note payable to BankUnited, FSB (BankUnited, or lender), for $145,000. That same day, she also executed a mortgage, referred to in the mortgage itself as a “[s]ecurity [i]nstrument.” The mortgage is separate from, but by its terms clearly connected to, the promissory note. The parties to the mortgage are Eaton as the “[b]orrower,” BankUnited as the “[l]ender,” and Mortgage Electronic Registration Systems, Inc. (MERS) 5 as the “mortgagee.”

[969 N.E.2d 1122]


Under the mortgage executed by Eaton, MERS as mortgagee (or its assignee) holds legal title to the Roslindale property with power of sale “solely as nominee” of the lender BankUnited (or its assignee). However, “if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose [462 Mass. 573]and sell the Property; and to take any action required of Lender....” 7

The mortgage also contains a series of covenants that run exclusively between BankUnited as lender and Eaton. The final covenant, entitled “Acceleration; Remedies,” empowers the lender, on default by Eaton, to “invoke the STATUTORY POWER OF SALE and any other remedies permitted by applicable law.” In this regard, the covenant obligates the lender, in invoking the statutory power of sale, to mail a copy of a notice of sale to Eaton.

On April 22, 2009, MERS assigned its interest as mortgagee to Green Tree and recorded the assignment in the Suffolk County registry of deeds. The record contains no evidence of a corresponding transfer of the note. The note was indorsed in blank by BankUnited on an undetermined date.8

Later in 2009, after Eaton failed to make payments on the note, Green Tree, as assignee of MERS, moved to foreclose on her home through exercise of a power of sale contained in the mortgage. A foreclosure auction was conducted in November, 2009; Green Tree was the highest bidder. The identity of the note holder at

[969 N.E.2d 1123]

the time of the foreclosure sale is not known from the record. On November 24, 2009, Green Tree assigned the rights to its bid to Fannie Mae, and a foreclosure deed was recorded in the Suffolk County registry of deeds.

On January 25, 2010, Fannie Mae commenced a summary process action in the Boston division of the Housing Court Department to evict Eaton. Eaton filed a counterclaim, arguing [462 Mass. 574]that the underlying foreclosure sale was invalid because Green Tree did not hold Eaton's mortgage note at the time of the foreclosure sale and therefore lacked the requisite authority to foreclose on her equity of redemption in the Roslindale property. A Housing Court judge subsequently granted a sixty-day stay of the summary process action to give Eaton an opportunity to seek relief in the Superior Court.9 The Housing Court judge also ordered Eaton to make use and occupancy payments during the pendency of her action. On April 8, 2011, Eaton filed a complaint in the Superior Court for injunctive and declaratory relief. The complaint sought a declaration that the foreclosure sale of Eaton's home and the subsequent foreclosure deed were null and void, and that Eaton was the owner in fee simple of the Roslindale property; a preliminary injunction to stay the summary process action in the Housing Court; and a permanent injunction barring Fannie Mae from taking steps to obtain possession of or convey the Roslindale property. For the purposes of Eaton's motion for a preliminary injunction only, the defendants stipulated that Green Tree did not hold Eaton's mortgage note at the time of the foreclosure. After hearing, the Superior Court judge (motion judge) allowed the motion and preliminarily enjoined Fannie Mae from proceeding with Eaton's eviction.

2. Standard of review. We review the grant or denial of a preliminary injunction for abuse of discretion. Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 741, 897 N.E.2d 548 (2008). The conclusions of law of the judge below are “subject to broad review and will be reversed if incorrect.” Packaging Indus. Group, Inc. v.Cheney, 380 Mass. 609, 616, 405 N.E.2d 106 (1980), quoting Buchanan v. United States Postal Serv., 508 F.2d 259, 267 n. 24 (5th Cir.1975). In considering a request for a preliminary injunction the judge evaluates the moving party's chance of success on the merits and its claim of injury. Packaging Indus. Group, Inc. v. Cheney, supra at 617, 405 N.E.2d 106. Because the defendants do not dispute the likelihood of irreparable harm to Eaton if Fannie Mae proceeds to seek her eviction through the summary process [462 Mass. 575]action, we confine our discussion to evaluating Eaton's likelihood of prevailing on the merits of her claim.

3. Discussion. As indicated, the motion judge determined that a foreclosure by sale requires the foreclosing mortgagee, at the time of the sale, to hold both the mortgage and the underlying mortgage note; and that if the mortgagee does not hold the note, the foreclosure sale is void. Based on this view, she concluded that because Green Tree, the assignee of the mortgage, had stipulated that it did not hold the mortgage note executed by Eaton when the sale took place, Eaton was likely to succeed in proving that the foreclosure sale was void and that the defendants had no authority to evict her and take possession of her home. See

[969 N.E.2d 1124]

Bank of N.Y. v. Bailey, 460 Mass. 327, 333, 951 N.E.2d 331 (2011) (challenging evicting party's entitlement to possession “has long been considered a valid defense to a summary process action for eviction where the property was purchased at a foreclosure sale”). The defendants argue that in reaching this conclusion, the judge misread the Massachusetts common law, and that, in any event, the statutory scheme applicable to exercise of a power of sale gave Green Tree absolute authority, as “mortgagee,” to foreclose. They also claim that Green Tree, as the assignee, had a contractual right to foreclose pursuant to the express terms of the mortgage. We begin with a brief overview of the common law of mortgages and then address the statutes governing exercise of a power of...

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